Here’s Why the ECB Is Going Tough on Eurozone Banks
The European Central Bank has formally announced its review of the region’s commercial banks that will occur over the course of the next year, Reuters reports.
In the release concerning the comprehensive assessment, the ECB has declared that the initiative will be comprised of three separate phases. The first step will be a supervisory risk assessment, in which the bank will examine the risk profiles of banks in the region. The second step will be an asset quality review that will scrutinize the asset side of banks’ balance sheets, and the final phase will be a series of stress tests to be conducted by the central bank in conjunction with the European Banking Authority.
Hitting major banks in all of the eurozone’s large countries, the review is expected to cover some 85 percent of the area’s banking activities. Beginning shortly with the risk assessment, the entire process is projected to take approximately a year to complete, meaning that it will be finished in time for the ECB to being its supervisory role of banks in the eurozone through the Single Supervisory Mechanism next November.